Tension is rising over the Reserve Bank of Australia policy decision in July, with all eyes on Governor Lowe’s speech next week, shortly before Australia’s May jobs data. Yet AUD/USD is even more tightly correlated with the US Dollar Index than usual, so the FOMC meeting is likely to be pivotal, as economists at Westacp note.
RBA Lowe speech and May jobs data the local highlights ahead
“Our underlying bias is for USD depreciation but we should brace for volatility after the FOMC meeting.”
“A$’s commodity price support remains very strong, with spot iron ore back to $212/t, coking coal at highs since Aug 2019 and oil (thus LNG) marching higher, though copper has softened.”
“We suspect AUD/USD sees choppy price action postFOMC but with a fair value 0.84+, are happy to remain long from 0.7680, adding on dips to 0.7580. If Lowe gives clear support to those calling for QE tapering and May jobs rebound, the gap to fair value should shrink.”
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